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18 Pages BUAD 307 Midterm Study Guide
- Course
- BUAD 307
- Institution
- University Of Southern California
BUAD 307 Midterm Study Guide
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Cumulative material● Customer value
- Customer benefit- Is the customer benefit greater than the sacrifice (Cost)?
- Yes- Potential Good Value
- No- Poor Value
- When what you get is more than what you give
- Value reflects the relationship of benefits to costs.
- Customers act as collaborators with a manufacturer or retailer to create a product or service.
● Considerations in determining suitability for products and services for sale online
- Value-to-bulk ratio
- Absolute (dollar) margin
- Ability of consumer to evaluate quality and fit through online description
- Convenience to the customer and willingness to pay for this convenience
- Customer sensitivity to delayed delivery
- Extent of customization needed
- Geographical dispersal of consumers
- Extent of inventory value decline over time
● Relative costs in selling online, in retail settings, and combined mode
- Selling online is typically more labor-intensive for merchant because the merchant has to perform the job,
or pay others to do it, the customer otherwise would do in the retail store
- online costs > retail costs > combined costs
● Profitability of online firms in markets where costs of selling online are lower
- Long-run behavior will lead to a competitive marketplace in which prices are low and profits are marginal
● Collaborative filtering
- a technique that can filter out items that a user might like on the basis of reactions by similar
users.
- ex. Amazon is known for its use of collaborative filtering, matching products to users based on past
purchases.
- "brute" computer force to identify additional items customer may want to buy
- Two Levels:
- Product Level: items bought together at high rates
- Individual Level: comparison of an individual to "similar" others who have bought many of the same
things.
- "Win-win" merchants have opportunity to sell more, while customer find things they otherwise wouldn't of
found
● Basic Internet economics
- 1) online merchants tend to have HIGHER costs than conventional retailers
- 2) Eliminating intermediaries usually = higher costs
- 3) Employees of e-commerce companies and their transportation services have to be paid to do the work
the customer would normally do
● Micro-payments—problems, opportunities, and applications
- Online content and services could be made profitably available for a small charge, but collecting small
amounts of money can be costly and inconvenient. (high fee) In general, merchant banks charge a
percentage fee for each transaction, which is typically between 1% and 5% of the transaction value. For
micropayments, however, this percentage fee can be higher, ranging from 5% to 10% or more, due to the
lower transaction value.
- Not viable for electronic content or tangible goods (shipping is too expensive for a small amount)
● Consumer involvement (types and manifestations)
● Associative Network of Knowledge
- The linking of one concept to another in a web-like format (ex: Lululemon- leggings, yoga, lemons,
health, kombucha)
● Tippability
- The potential of a small factor to change a low stakes decision from one alternative to another one
Segmentation, Targeting, and Positioning
,● Reasons for segmenting
- allows you to target your content to the right people in the right way, rather than targeting your entire
audience with a generic message.
● Michael Dell strategy for selling newspapers
- CEO
- Source: Michael Dell
- Message: the power of Dell for business
- Channel: a business magazine
-
- Mom
- Source: Mom
- Message: Dell helps you judge life demands and focus on you
- Channel: a personal lifestyle magazine
-
- Dell Interns:
- Source: Dell Interns
- Message: various ways people use their Dell
- Channel: TV
-
- Product
- Source: Product itself
- Message: limited quantities of the Dell
- Channel: display ad
● Segmentation
● Bases
● Broad categories of factors (e.g., demographics, behavior)
- Geographic: Part of demographic. Regions (Climate and physical environment (socal in
warmer than other area), tastes (Cambell soups in the west coasts are more spicy than the
soup in the midwest), lifestyle & value (urban vs. rural areas(people think living in the city will be
easier to shop but they are wrong, walmart target small town since real estate in cheaper and
people pay higher price, target in Pasadena has two floors))
- Demographic: Statistical, occupation, age (younger people are more familiar with climate
change), gender (home depot launch to appeal to women), ethnicity (immigrants feel less
appreciate if ads are in their own language), family life cycle stage (children move out make
parents feel lonely, young people might spend more on concerts since they don’t have children)
INCOME DOES NOT EQUAL TO WILLINGNESS TO SPEND!
- LOWERING PRICE MIGHT NOT HAVE THE BEST EFFECT ON MARKETING
- Psychographic: Motivation (why buy life insurance?) Demographic value & lifestyle (people
might have the same demographic but different lifestyle, like same jobs but one is healthier)
- Benefit desired: benefits customers are looking for
● Specific variables within each
- Micro-segmentation: what are sold in stores are based on residential demographics, other
characteristics, may be largely data driven based on past sales (scanner data)
- Different in arbitrary tastes that attract those who don’t have coffins for example. Trade Offs:
taste vs calories) Usage situation: ex. People who don’t drink instant coffee often might do that
on a camping trip
● Variables, levels, and segments
- Segmentation by Device Type: Google will share your information about your device, browser,
and location. Apple users are different from window users. Businesses can send ads based on
those information
- Usage rate: 20% customers buy 80% of the consumptions bc people return
- Brand switching: 1. People want to have different things. 2. People switch to cheaper price.
- Loyals: People who are loyal to the brand (hard to switch)
- Inertials: They are not planning on staying loyal
● Criteria for effective segments
1. identifiable
, 2. accessible
3. responsive
4. substantial
● Geolocation tag based methods (NOTE: This is NOT the same as geographic segmentation!)
- People who agree to have their location track by companies
- Company can track customers’ shopping patterns to identify customer group
● Traditional vs. “hyper-focused” segments
- Value Seekers go to dollar tree or other cheaper places
- Healthy and Wealthy seekers go to wholefoods
- Hyper-focused segments: Some shop frequent at a store than others. Created by using geolocation
tag.
● The George Foreman Grill:
- Ads were shown with a boxer, but the ads is unsuccessful since audiences are mostly women
● Norwegian Cruise Lines and “freestyle cruising”
- Cruises used to be very regimented since they have a regular schedule about dinner and children aren’t
happy. The Norwegian Cruise Lines add restaurants that opened late and have more fun events
● Individualized pricing (customer past behavior)
- People who have not shopped at Staples may receive a coupon.
- Amazon may base the price offered on previous purchases. New customers may receive lower price
offers.
- Those who pay for airline or seat upgrades may be less likely to get free upgrades by the company
- Dynamic pricing: emphasize on market conditions (supply & demand)
● Targeting
● Process:
- How to identify? You can buy info about people (direct mail lists, TV network viewer data, retail
store level scanner data, specialty media like online magazines, search behaviors like site visit
frequency). Firms sell people’s information and buy lists from competitors. Some states limit
this.
- Why still use Direct Mail Catalogs: Produce higher quality images through magazines, 1-3%
higher response rate than traditional media.
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